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Advice

This section is for entrepreneurs to post general advice on the fundraising process for other entrepreneurs to use. Topics include terms, tactics, and strategies that have proven either effective or ineffective. Help other CEOs succeed with some sage advice from your own experiences.

Posted by
MedTechCEO
on 2017-08-18

Posted by
TechCEO
on 2016-09-05

PUBLIC:

What's the right amount of equity and salary for taking on the CEO role pre Series A? Would be responsible for raising the round and building out the company. The technical founders have developed good clinical data with limited resources.

Posted by
rajuch
on 2016-06-14

PUBLIC:

Dear Friends,

I am seeking advice and information. Is it possible to find investors or partners, who could spend few days on even up to couple of weeks to validate our scientific discoveries and inventions, which will revolutionize software engineering? We secured following US patents on our inventions 7827527, 7840937, 8527943, 8392877, 8578329 and 9058177 so far.

Nearly 15 years long software research resulted in inventions of real-software-components for COP (Component Oriented Programming) for achieving real CBSD (Component Based Software Design). Real CBD increases overall productivity of software developers by 3 to 7 folds based on complexity (i.e. overall productivity can go as high as 10 folds for very complex software). All the evidence is openly provided in many web sites, to name a few: http://real-software-components.com and https://www.researchgate.net/profile/...

This kind of inventions requires inventing enabling Tools, technologies and processes. For example, we invented CASE-tools for automating many tasks for assembling and managing communication interfaces between the real-software-components and worlds first GUI technologies for building real-software-components. No other GUI-technology exists today (i.e. from Microsoft or Apple) is capable of creating larger real-software-components.

I built a small team (pioneer-soft.com) of engineers for creating most advanced GUI Library in the world for building complex real-time data-driven GUI applications by investing about US$100K. We are running on shoestring budget can’t afford to invest on flashy web site or marketing. We are very poor beauticians to make our GUI components look colourful. Our competitors invest 2 to 3 times our annual budget on designing flashy web sites. Should I hire UX designers at US$120K/year to make my web site look great, which off course have no value addition to our GUI solutions?

If the GUI components look good in the theme of our competitors web sites, doesn’t mean the GUI components look good in the web applications of customers. Each customer must hire a UX designer to design a theme for the web-application and use appropriate colours, styles and fonts to configure look and feel of each GUI component in the application. Our GUI components are more configurable (to apply any colours, styles or fonts) than the GUI components of our competitors.

All our scientific discoveries and patented inventions can be validated upfront beyond any reasonable doubt. I feel, our patents for GUI technologies alone worth few million dollars. The foundational concepts for software components and CBSD are rooted in flawed belief, which alone is responsible software crisis (that already cost trillions of dollars so far), and would end up costing trillions more to the world economy in coming decades.

If we can prove our discoveries are true to scientific community and we are able to build wide enough awareness among scientific community, our inventions could be worth several hundred millions to billions. We own patents for real software components and COP (Component Oriented Programming). Can anyone imagine building large physical products (e.g. cars, computers or airplanes) without using components? When we become successful, I believe, almost every large and complex software application and product will be designed and built by using COP (i.e. assembling replaceable components). If it is True, what is the value of such inventions, Tools, technologies and processes?

We are willing to give reasonable liquidation preference to protect investment to protect the investment. Our patents alone can cover their investment. I believe, it would cost US$ 3 to 5 million on PR and promotional campaign to create enough awareness among research community and compel the government funded research organizations (e.g. NSF.gov, NITRD.gov, DoD and CMU/SEI etc.) to validate our discoveries and evidence. Our discoveries help the USA defend and strengthen its leadership in software engineering.

I contacted hundreds of researchers and the government funded research organizations for past several years, but not able to get an opportunity to present our evidence and proof. I am extremely frustrated with scientific community. Are there any investors who are willing to investigate such disruptive scientific discoveries and patented inventions? They can invest only when their experts are 100% satisfied that I am right. But it may take few days or up to couple of weeks. Do the investors have that kind patience? I am looking for people, who have unusually high intellectual curiosity. It can be proved beyond any doubt, because it is a discovery of scientific facts, which are backed by demonstrable and repeatable evidence.

The accuracy of scientific discoveries are not influenced by popularity context. A real scientific discovery is still true, even if every expert in the world don’t believe it. Let me give you an analogy: If a researcher invents vaccine for cancer, it still work even every medical expert thinks it won’t work. If it doesn’t work, it still can’t work, even if every medical expert beliefs that it would work. The perception of mankind may change the value and use of inventions, but can’t change the degree of Truth of a real scientific discovery. Is it possible to find investors, who have patience and high intellectual curiosity to investigate disruptive scientific discoveries?

We are a healthcare technology startup company (pre-revenue stage) located in GA. We have spent significant amount of our time (last 8 years with a global team, around $1M invested) working on the technology that we feel would change the way healthcare is done. We are about to launch the cloud-based enterprise class product platform. We put together business plan, financial projections, pitch deck. We are planning to raise about $3.5M. Having not raised any capital before, I am not sure about the best approach:

1. Consultants: Every one I spoke with wants upfront money (or hourly fee) and it is hard to allocate money until capital is raised (based on our current situation). Also, most of them do not have broker-dealer license.

2. Investment Bankers: I tried to contact couple of investment bankers and none of them responded. As per my understanding, they charge a percentage and do not require any upfront investment. Can you suggest few firms? Is this a good approach?

3. VCs: They usually need introductions and I do not have any connections in this area.

4. Crowd Platforms: I am not sure if this is suitable for our type of capital raise. I checked into EquityNet and it looks like, I need to contact each individual investor.

I know lot of you have the expertise on the subject. If you can share any thoughts / suggestions or contact suggestions, it would be greatly appreciated. If you would like to speak with me privately, please suggest.

Posted by
Frank1
on 2016-02-12

PUBLIC:

Cavendish Global allegedly assembles family offices hungry to invest in healthcare related deals. They host large and nice events and charge entrepreneurs big bucks to attend. I've spoke with several CEO's who attended and say it is a total bust. No family offices there that actually want to meet anyone pitching a deal. Apparently they make money by swindling CEO's in to coughing up entry fees and then receiving zero benefit. The leader of this group then duck call and complaints post meeting. Beware.

I founded a startup and I have found a team of programmers that only work on it part time as they have to make some money to pay their living costs. Living in a country where equity isn't as valued as in the states it was very hard to find a team to begin with to start working on a no name startup and where funding is not readily available.

I am the only one working on it full time, as a non too technical biz dev person I keep running into problems. While I do customer development and basically have clients waiting on us to deliver (willing to pay), this keeps beeing a stumbling block. They are too slow to deliver and doing a presale is hard to pull off when I even doubt that they can deliver on time. I have them under a vesting scheme with 1 year cliff and it's about half a year into development.
Do not get me wrong, they are professional in what they do and I like them as people.

Discussing joining an accelerator for some seed money and focussed working months in one space to speed things up was met by them with the opinion that they do not think that we have enough of our product yet which isn't true.
We've got some good initial traction and some data that is sellable to establish an early adopter paying model. I'd like to explore my options and a potential scheme of controlling how much they have worked on the code as well as a line of argumentation to either motivate them to step up to the game or slowly show them the door and find a good replacement.

Dealing with a potential investor who represents he is able to invest 1-4.5million, but asks for upfront money to do due d. His diligence team remains anonymous and he will not provide any references to other private placements he has done.

I have been working on my product for 4 years while employed full-time for another employer. I have invested more money than what some entrepreneurs are able to raise in Seed Funding, into building the product. But I have invested this money over a period of 4 years (70% of my monthly paycheck every month) and I continue to pay contractors on an ongoing basis to enhance the product. I am now looking to go to investors and start showcasing the product for Series-A funding.

Does anyone out here see any risks, because of the time and money that was spent on building the product. The same product could have been built in about 2 years of R&D, if the entire team including me was full-time.
Does it matter to the investors how much time it took to mature the product? Will the life of the company be seen as a negative?

Roughly 6 months back my company outsourced the development of our IoS app so that we could create a raw version of our concept to attract investors and awareness in the Golf industry. We have now raised 150K and are looking to raise 350K more in the near future. We are looking to make a few key hires in the very near future to bring people on board with very specific skill-sets. Do you think 150K is enough to comfortably hire a full time developer (I'm thinking 75K and 2% equity) as well someone who can focus on PR and marketing through various social media outlets?

Additionally, does anyone know a quality developer who may be interested in working on a Golf startup full-time??

Posted by
innovator94086
on 2013-07-31

PUBLIC:

I am trying to help a fellow entrepreneur seeking an angel round for development of a co-processor for handling big data. My background has been 30 years in software related businesses, and I know many VCs and angels who invest in software businesses but I don't know early stage investors in the Semiconductor space. Can anyone point me at a list of top early stage investors in semiconductors?

Posted by
DecisionTime
on 2013-06-17

PUBLIC:

For my new venture I need to raise $1.5M - $2M to get to profitability. The business is a local NYC retail opportunity leading to ecommerce in 2-3 years (dictated by pace of certain legal changes). It could be a great cash business or scaled with more investment to shoot for something huge.

I've found a bank that has made similarly or larger sized loans to restaurants and other businesses in NYC and can get an intro from a multiple-time successful loan recipient of the bank. I haven't started fundraising yet but have been planning on angel funding, have 250K committed so far, and am confident I can raise what's needed. Should I pursue both these options at once? Is a business loan I'm personally on the hook for, and a shorter-term plan to be more of a 'family' business a good idea versus raising money from angels, on a path to venture funding, with the goal of scaling asap? I'm confident the business can make money and be profitable if I go the loan route. I also imagine I could go the angel/vc route later if I start with the loan. Any ideas or thoughts or advice would be welcome.

I'm currently involved as a mentor in a start-up. My role is to give general guidance, answer questions, typical mentor stuff...

The start-up I'm advising had a very nonrefundable company when I first got involved. Early feedback from a number of folks supported this quite strongly. The team is technically sharp, overall quite smart, but very inexperienced, which is understandable since they're just out of college. I've gotten a lot more involved then what I expected - to the point where I completely recreated a product vision and road map for the team, which is completely different than their original vision.

The feedback from the new product vision has been extremely strong both from many potential customers as well as very senior people from the industry. It is very disruptive to a massive industry and has the potential to be extremely viral. Much more work to be done, but many positive signs so far. There's a significant amount of work ahead for the company but everyone is getting very excited, including myself.

I'm basically setting the course, mapping out the game plan, creating the near term tactics that need to be taken, helping with the pitch, you name it. I'm also driving the look and feel of the product. Only thing i'm not involved with is writing code. I love doing this, but I don't think this level of effort should be for free.

The question I have is whether it's reasonable to expect an equity stake in the company, and how much for the significant positive change that I've created for the company, and the much needed continued support and experience that the company will continue to demand, which I will provide.

Granted the company has a very long way to go, but it would be very tough to see the company become a great success (best case) and I get a thank you at the end of it, while others get a return from their equity stakes.

I understand that most start-ups fail and worrying about If the company is successful may not be practical. However, I know what direction this company was going and know the impact i'm having and know my continued involvement will greatly increase their probability of funding and success.

Posted by
Mellop
on 2012-08-19

PUBLIC:

Our house wasn’t vacant for us to move in until 3 days after the date we were given by the landlord. This meant the team (remember, I arrived about a week and a half later than everyone else) had to live out of random hotels in the area for another few days.

Lesson: Priceline.com is a good go-to for finding temporary places to stay should you need it. Our guys were able to stay at a Days Inn 2 miles from the accelerator offices for $50 a night:

Housing situations vary greatly among teams in the accelerator. Some have already locked down a local house or apartment, some are staying in local college dorms, some are still looking. I know the teams that are still looking because they are talking on the phone in the office during the day trying to secure something, which is a huge waste of your time in the program.

I’m very glad we had housing set up ahead of time. We found it through Craigslist while we were on the East Coast and we were able to get a friend to go to the house and check it out/show the landlord we were real. The one area we failed here was in negotiating the price down based on the current state of the house. It had been abused by the prior tenants to the point where we had the landlord replace the carpets. We also had some spring cleaning to do around the backyard. In our case this meant dragging old children’s toys out of the yard, even a car jack with accompanying large metal rods. The picture below is after all of that work – the bushes were littered with work equipment and cans before we cleaned it up.

Lesson: Try and get everything you can squared away before the accelerator program starts. Programs are generally 12 weeks (ours is 10 plus a pitch day after a 3 week gap), and wasting a week on your living situation means 10% of your accelerator time down the drain. If you’re like us, your accelerator is taking a chunk of your equity at less favorable terms than other sources you’ve raised capital from because you’re paying for the mentorship, environment, office space, connections, and other perks. Thus, you’d actually be wasting your money by not spending a little extra to arrive a week before the program starts. The “figure it out when we get there” approach sounds all rugged and bootstrappy, but it’s inefficient.

Lesson: Craigslist will become your best friend at this stage. We rented a UHaul truck for an afternoon for $60 and picked up 3 mattresses (average cost $40, some free), a coffee table, a lounge chair, an HDMI monitor ($20), and a few other essentials at absurdly low prices. I got a dresser, nightstand, desk, and queen IKEA bed with mattress for $350 all in.

Other stuff will inevitably come up. You might want/need a car, you’ll need to set up water/gas/electric/internet service, unpack, learn your way around the area, find the local-take out spots, and the list goes on. It took me 2 weeks to hunt down 2 of the packages I sent to myself for the move via USPS. Your bedroom will consist of bags, a mattress on the floor, and a single light for at least a week. Friends and family will be interested in hearing about the radical shift you’re making. They have all the best intentions, but will be contacting you while you’re scrambling to try and figure all of this out. Bottom line: get ahead of the game.

How much equity is appropriate for the lead product developer of a tech startup? We are hoping he will develop into a full-blown CTO and partner in the business. He has been involved in the company since it took its current turn into software, but part-time and while doing his PhD which is not done. He will not be full-time in the foreseeable future. He has good technical knowledge but to develop as a manager let alone partner needs to be in the office every day but is rarely here because of PhD. Any salary will be limited in the near term because our funding is limited. We expect more funding (possibly even from an existing investor) within 3-4 months when the prototype is done. We offered him 15 percent of the company vesting over 5 years, he says it should be more, we agreed to do a survey on this site and to speak to others about standards. Everything is complicated by the PhD and the fact that he is not full-time. Both CEO and programmers (below the product manager or CTO level) are working full-time. Strong relevant specialized technical knowledge but if we have to pivot or emphasize other technical areas in our product in the future what will count most will be software development, project management skills, entrepreneurial focus and sticktoitiveness. Are there standards on this that we can adapt to our complicated case?

Posted by
E=mc2
on 2012-05-16

PUBLIC:

One time I went to a 'fast pitch' speed dating event between investors and entrepreneurs. We were given one minute to tell investors what we did and how we were going to make money. As I waited my turn, I noticed that entrepreneur after entrepreneur would get up and completely failed at communicating exactly that. So much of what they said made ABSOLUTELY NO SENSE. Why? I'm not a tech geek, but I do know a bit about business. Well, why is this important? Because most investors, while they may be tech savvy, are also business oriented and for the most part, NOT TECH GEEKS.

Another problem with the entrepreneurs - they were also mostly POOR speakers, often looking down at their shoes. Well, NOBODY LIKES SHOE GAZERS. Public speaking is essential at being able to get your message across! If you want someone to invest in your product, you must be CONFIDENT. Standing there nervously stammering what you are trying to do, well, that is not going to inspire anyone to invest in YOU. Even if you think you have the most compelling product/service in the universe. If you come across as a social mis-fit, ugh. Do your pitch first before a mock audience if you must or get coaching. This is really important.

And also, DON'T GO FAST!! If you have so much information, don't run at the mouth. I noticed again, that because they were limited to a minute, they tried to speak AS FAST AS THEY COULD. When you do that, you end up with an audience who could NOT follow a word you said and again, completely MISSED your message.

When I got up to speak. I kept it short, to the point, I spoke TO the audience AND I spoke SLOWLY and CLEARLY with NO GEEK TALK. When I finished, unlike the other entrepreneurs, I was flooded with cards from investors.

So my advice. Keep your pitch short and simple (KISS) Leave them wanting more because if they want to talk to you, you'll have stuff to tell them.

I know this sounds really obvious, but judging from the amount of entrepreneurs who got up (there were close to 100) they all, for the most part, did all of the above. Except me!!

I got two rounds of angel investment (from the same investors) in the form of convertible notes. The second round was made before the expiration date of the first round. The first round expiration date has come and gone. The first round had a conversion to equity valuation of X, the second round was 66% of X, due to lack of progress. The second round expiration date is coming up. The company has made some recent progress, and the market is improving for our product. I'm seeking a larger round from new (and existing) investors. My existing investors are saying they would like to amend the first round notes to match the expiration date and conversion valuation of the second round. Is this fair? It seems to me like renegotiating after the fact, based on perceived leverage. But what is the leverage? If they demand repayment of the first round now, the company would go bankrupt (there is little asset value for them to recover). Any advice is appreciated- I'm happy to clarify if this is unclear.

Posted by
you_the_man
on 2012-02-04

PUBLIC:

I have used many of the large law firms (Wilson Sonsini, Cooley, MoFo, etc.) and several sole-practitioner attorneys. While the large firms are good for some tasks, they are outrageously expensive, and I have used very experienced sole-practitioners for contract work at about $225/hour (MUCH more cost effective than large firms). Unfortunately, my 'go-to' attorney for this is no longer available, so I am looking for a new one. Ideally, experience with reviewing partner/alliance contracts for open source software, and based in the San Francisco Bay Area.

Please share on this board if you know of someone good for this legal work.